Q1 2024: Memory Demand, China Shipments Lift Wafer Makers

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The Counterpoint report concluded that despite the overall revenue decline, few factors benefited wafer fab equipment manufacturers in the first quarter of the year, conveying hope. 

High demand for memory chips and increased shipments to Chinese consumers have compensated an overall revenue decrease of 9% YoY for wafer fab equipment (WFE) manufacturers. Counterpoint has concluded this result by conducting a study on five companies based on their market share: ASML, Tokyo Electron, Applied Materials, Lam Research, and KLA.

The report has cited delayed customer investments in semiconductors as the leading reason behind this decline. Individually, ASML and Tokyo Electron saw their revenues drop by 21% and 14% year-over-year. Applied Materials, Lam Research, and KLA experienced revenue declines in the low single digits compared to 2023.

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Despite this decline, high demand for cutting-edge memory chips, DRAM and NAND, was noted worldwide. Tokyo Electron individually delivered an 18% revenue increase due to this. In Q1 2024, all five WFE manufacturers saw a 33% year-over-year growth in memory revenue, driven by this high demand, resulting from AI adoption. 

However, revenues from the foundry segment dropped by 29% year-over-year. ASML’s revenue dropped by 26% compared to the previous quarter, while KLA’s revenue decreased by 5% due to adjustments in customer capacity in the advanced node sector. Applied Materials and Lam Research saw their revenues remain unchanged quarter-over-quarter.

The report further highlighted that full-year revenue is projected to grow by 4% in 2024 compared to 2023. 2025 YoY revenue is expected to double-digit growth as the industry stabilises. This growth will be driven by capacity expansions in advanced logic and foundry sectors, applications such as generative AI and high-performance computing (HPC), and the recovery in chip demand.

Senior Analyst Ashwath Rao has predicted a more robust recovery in the second half of 2024. Despite uncertainties in the short term, he anticipates a turnaround in the coming quarters, expecting Q1 orders to rebound due to US subsidies and upcoming 2nm technology, with AI as a major chipmaker priority. 

Regarding the Chinese market, Rao said, “Increased sales to China in Q1 2024 offset revenue decline from other regions. China has also been spending more on DUV equipment to use it creatively for some leading nodes with techniques such as multi-patterning.”

According to him, Chinese chipmakers are prioritising domestic manufacturing capabilities and achieving technological independence from Western suppliers. 

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